Is the UK housing bubble about to burst? These are the best and worst scenarios | Josh Ryan-Collins

UK GDP has fallen - yet house prices have soared. Even a small rise in interest rates could hurt the economy

UK house prices appear to have defied economic gravity over the past year. The lockdowns triggered by the pandemic led to a 10% fall in GDP, the largest fall in 300 years, since the Great Frost of 1709. Yet the latest data shows house prices have grown at the fastest annual rate - 13.4% - in 17 years. Are we in the midst of another housing bubble?

An optimistic scenario is that the current boom is driven by the unusual circumstances of the pandemic rather than more systemic problems. Spending more time at home has led many homeowners to desire more space and a better environment. They have used the record buildup of household savings, amassed during the lockdowns and supported by the government's furlough scheme, to buy larger homes or move out of cities (property prices outside cities have increased by 14% compared with 7% within them).

Related: UK house prices rise at fastest rate since 2004 amid stamp duty rush

Related: House price inflation will continue for now, hitting the young and low-paid | Larry Elliott

Josh Ryan-Collins is head of finance and macroeconomics at University College London's Institute for Innovation and Public Purpose